Mumbai \u2014 The Indian rupee had a mild comeback against the U.S. dollar in early trade on Friday as easing crude oil prices and a softer greenback globally supported it. The local currency opened around 5 paise stronger at \u20b988.64 per U.S. dollar in the interbank foreign exchange market, defying the sustained foreign fund outflows and weak investor sentiment.<\/p>\n\n\n\n
The rupee gained for the second consecutive day, currency traders said, largely influenced by positive cues from overall global markets and a brief halt in the rally of the dollar. The US dollar index, which measures the currency’s performance against a basket of major peers, slipped marginally as investors awaited key U.S. economic data and the Federal Reserve’s commentary on future rate actions.<\/p>\n\n\n\n
“Oil prices have been trending lower over the past few sessions, which has provided some relief to the rupee,” said Anindya Banerjee, Vice President (Currency Derivatives & Research) at Kotak Securities. “However, the broader trend remains cautious as India continues to see consistent foreign portfolio outflows and persistent demand for dollars from importers.”<\/p>\n\n\n\n
So, Brent crude futures, one of the global benchmarks for oil prices, hovered around $83 per barrel, down almost 1% from the average of the previous week. Since India is a big importer of crude oil, any decline in global oil prices tends to ease pressure on the rupee by reducing the country’s import bill and dollar demand.<\/p>\n\n\n\n
Meanwhile, domestic equity markets remained turbulent. The BSE Sensex was trading marginally higher, while NSE Nifty50 hovered near the 24,000 mark as investors digested mixed global cues. The upbeat opening in the equity session provided some support to the local unit, but traders said sentiment remains fragile due to geopolitical tensions in the Middle East and uncertainty over US interest rate cuts.<\/p>\n\n\n\n
The rupee had come under pressure in recent months due to sustained capital outflows and elevated bond yields in the U.S. The yield on the 10-year U.S. Treasury remained near 4.7%, making dollar assets more attractive to investors than emerging market currencies. This trend has resulted in foreign institutional investors withdrawing funds from Indian equities, prompting rupee weakness.<\/p>\n\n\n\n
According to market analysts, the RBI seems to be closely monitoring the currency’s movement and is possibly intervening intermittently to restrict undue volatility. Although the central bank does not comment officially on its actions in the market, traders have observed signs of mild intervention through state-run banks in recent sessions.<\/p>\n\n\n\n
“The RBI has been comfortable keeping the rupee in a range, ensuring that it doesn’t depreciate too sharply,” said Madhavi Arora, Lead Economist at Emkay Global. “With inflation relatively stable and India’s forex reserves near their record highs at $649 billion, the RBI has adequate ammunition to intervene and stabilize the currency at will.”<\/p>\n\n\n\n
Analysts are cautious that despite Friday’s rebound, the rupee may not be out of the woods in the near term. Its path for the next weeks will be determined by factors like the upcoming meeting of the U.S. Federal Reserve and the economic data from China, along with the fluctuations in crude oil prices.<\/p>\n\n\n\n
The exporters, however, are looking at the current levels of rupee as fairly good. “A moderately weaker rupee improves export competitiveness, especially for IT, pharma, and textile sectors,” said Ravi Sinha, head of trade strategy at ICICI Bank. “But extreme volatility hurts long-term planning, so a stable band between \u20b988.50\u2013\u20b989.20 would be ideal for both importers and exporters.”<\/p>\n\n\n\n
Currency strategists see the rupee trading in a range of \u20b988.50-\u20b989.10 per dollar in the near term, with mild appreciation likely if global crude prices stay subdued and the dollar index weakens further. Overall, the rupee’s partial recovery presents short-term relief in the continuing global turmoil. With traders looking to important macroeconomic data and central bank action, stability remains the watchword for India’s forex markets going into November.<\/p>\n\n\n\n
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